Most companies have a transactional model. However, a shift to recurring revenue is interesting. This can happen in combination or be the only alignment. But why does the switch make sense and what are the benefits to you and your business? This is where the term Rundle comes into play.
What does Rundle mean?
A rundle is an acronym that stands for a recurring revenue bundle. In other words, a bundle of services that generates predictable revenue by engaging consumers in a paying relationship.
Rundle= recurring-revenue + bundling
Who invented Rundle?
This name is particularly memorable and was coined by Scott Galloway, professor of marketing at NYU Stern, to describe the power of bundled recurring revenue subscriptions like Amazon Prime. In 2005, Galloway (Prof G) founded digital intelligence firm L2 Inc, which was acquired by Gartner in March 2017 for $155 million. He teaches brand management and digital marketing to second-year MBA students.
Why you should think about Rundle
The advantage of Rundle is the predictable revenue that will be generated in the future. This strategy results from various consumer trends and has important future implications for the brand.
Subscription as a Service is becoming increasingly popular in both B2C and B2B environments. It results from consumers increasingly accepting subscriptions over one-time payments and valuing access and use over actual ownership. According to a 2018 McKinsey study, 15% of online shoppers sign up for one or more subscriptions to receive products on a recurring basis.
An Abo model exploits one of the fundamental weaknesses, which is the inability to register time. Time flies – it passes faster than our estimated consumption of a product in a given period of time. Only 18% of gym members consistently go to the gym.
The key for brands is to evaluate their current business model to determine how you can convert one-time purchases into a recurring payment model. In 2018, subscription sales accounted for 86% of Adobe’s total revenue and increased profits by 77% year-over-year.
What is the difference with the subscription model?
When you weave the two concepts (subscription and bundling) together, the result is the Rundle – a package of recurring revenue. This can change the way we shop and consume.
Business has mistakenly thought choice is a good thing. In reality, consumers want less choice and instead more confidence in the few options presented to them. Bundling solves this problem by allowing customers to make many of their purchases from a single retailer or service provider. At the same time, the average order value is increased can. Brands have the opportunity to sell less popular or new products by including them in the bundled subscription service.
Attracting new customers is much more difficult and expensive than retaining existing customers. Rundles can enable brands to effectively leverage their existing customer base.
The best example is Amazon Prime. The service is currently growing at 8% annually, and two-thirds of American households subscribe to Prime. By adding more products and services to the subscription, Amazon is making their offer more enticing and increasing switching costs. In addition to fast free delivery, Prime now offers access to music and streaming video services, photo and cloud document storage, and more.
Smaller brands could look for strategic partnerships and alliances to create subscription bundles. Big brands like Apple and Google can build incredible, high-margin recurring revenue streams to further monetize their immense fan bases.